[Viewpoint] FTA requires flexibility

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[Viewpoint] FTA requires flexibility

Once again, with no deal reached at the G-20 Summit in Seoul, the three-year-old Korea-U.S. FTA (Korus) is at a turning point. U.S. President Barack Obama is still committed to passing the trade pact in 2011, despite his diminished power after the Democratic Party’s major losses in the recent midterm election. But difficult decisions lie ahead to finalize the deal, and Korea must keep its eye on the grand prize as it charts the path toward passage.

The current political context for the Korus in the U.S. requires some changes to the deal concluded in 2007 with respect to autos and beef. The midterm election has not changed this basic fact. Republicans, now in the majority in the House of Representatives, generally support trade deals and have declared their willingness to work with Obama to pass the deal.

However, many Republicans, including the incoming chairman of the powerful House Ways and Means Committee, David Camp of Michigan, sympathize with the recent plight of the U.S. auto industry and believe that revisions to the Korus’ auto provisions are needed. Further, Senator Max Baucus of Montana, whose support is needed for ratification of the deal, continues to go along with his supporters to insist on additional Korean market access for U.S. beef.

President Obama will not be able to present the Korus to Congress for ratification unless he can placate those Democrats in Congress who remain skeptical of, or even oppose, the deal. Making matters worse, several key moderate Democratic members of Congress who were champions of the Korus lost their seats in the midterm election: about half of the moderate Democrats who generally support trade lost their seats on Nov. 2. The percentage of Democrats in Congress who support the trade pact has thus declined, and opposition to the deal among many remaining Democrats in Congress is thus expected to stiffen. In short, while Obama has gained likely Republican votes in favor of ratification, he has lost many Democratic votes, presaging a challenging U.S. political landscape for the trade deal.

The U.S. political context for the Korus is further complicated by declining public support for trade agreements. Support for free trade deals is now at one of its lowest points in decades, with nearly half of Americans believing that trade agreements have had a negative effect on their personal financial status. Although many U.S. businesses strongly support the Korus and do not want to be left behind as Korea passes trade deals with other countries - most notably the EU and India - the public’s growing skepticism about trade will weigh heavily on many Democrats who are well aware of the electoral losses many of their moderate colleagues suffered earlier this month.

Similarly, the political environment in Korea is inhospitable for the Korus. On autos, many, including in the opposition, correctly believe that the U.S. has reneged on the deal struck in 2007, and they oppose further changes. With respect to beef, memories of the 2008 crisis remain fresh, and public sentiment is against reopening the issue. Korea would be justified in taking a principled and firm stance against the U.S. demands. Such an approach is, however, very likely to eliminate the Korus’ prospects for passage in the U.S. altogether.

As negotiations to finalize the Korus reach a possible end-game, Korea should not lose sight of the larger benefits that passage would bring. Most experts opine that the Korus would boost bilateral trade and investment, increasing wealth and opportunity in both countries.

The benefits of passing the Korus, however, go far beyond economic considerations. With Korea as the first major Asian country to enter into an FTA with the U.S., the trade pact would also help buttress the security alliance between the two countries. The value of such a symbol of enhanced U.S. engagement with Korea is all the higher as North Korea continues its erratic path towards a new regime and as the U.S. seeks regional counterweights in Asia to China.

When viewed in light of the substantial economic and strategic advantages that the Korus would bring to Korea, the remaining areas of disagreement between the two countries involving autos and beef, while politically charged, are not that significant. With respect to beef, for instance, the real issue is public health and safety. Under WTO rules, however, Korea always has the right to take certain action that might be necessary, including stopping imports, to prevent the spread of mad cow disease or other pathogens that might be found. And although auto trade is important, it is one of many industries impacted by the Korus and the potential revisions to the deal are minor.

The public, politicians and the media need to be mindful of this and focus on the long-term benefits to Korea. These benefits behoove Koreans to rise above the political and emotional fray, and to help untie the hands of Korea’s negotiators as they attempt to clinch a final deal with the U.S. Indeed, this is no time for Korea to lose sight of the forest for the trees.

*The writer is a senior partner at the law firm of Akin Gump Strauss Hauer & Feld LLP in Washington, D.C.

By Sukhan Kim
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